Red Flags to Look Out for in Non-Disclosure Agreements

Katz, Marshall & Banks partner Debra Katz was quoted in a Moneyish article titled, “This is what you need to know before signing an NDA.” With all of the attention brought to non-disclosure agreements (NDAs) by Harvey Weinstein and Stormy Daniels, Moneyish asked Ms. Katz what employees should look out for in their own NDAs.

First, the breadth of an agreement can say a lot about the intentions and purpose of the contract. It’s perfectly normal for NDAs to protect confidential information and trade secrets, but they shouldn’t be “geared to try to muzzle the employee.”

Second, unreasonable NDAs will often have astronomical liquidated damages attached. “We have seen cases where someone earns $30,000 to $40,000 a year, and the employer’s NDA has a liquidated damages clause of half a million dollars per breach,” said Ms. Katz. This is clearly an attempt to scare employees into remaining silent, no matter the situation.

Finally, some NDAs go on in perpetuity, which is extremely restrictive. “It’s just overreaching,” said Ms. Katz.

The author also points out that forced arbitration clauses can be the sign of a troubled agreement, and it’s never a breach of an enforceable NDA to go to the authorities with a discrimination or harassment claim.

“The fact that you signed this doesn’t prevent you from going and reporting these issues to the appropriate law enforcement and other regulatory agencies.”

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